Services Trade in Focus as TISA, TTIP, RCEP Aim for 2016 Conclusion

3 March 2016

Services trade governance could see some significant developments in the coming year, as various major trade initiatives confirmed separately last month that they hope to reach conclusion in 2016.

In recent weeks, negotiators for three major pacts – the Trade in Services Agreement (TISA), the Transatlantic Trade and Investment Partnership (TTIP), and the Regional Comprehensive Economic Partnership (RCEP) – have all met to set the stage for a scale-up in pace for their respective talks.

Meanwhile, the Trans-Pacific Partnership (TPP) is now entering the ratification stage in its 12 participating countries, with one-third of the pact’s 30 chapters dealing either directly or indirectly with services.

Together, the four processes cover nearly one-third of the world’s countries, while representing the lion’s share of world output and trade. Along with their commercial heft, they have also drawn growing attention in light of the limited progress in trade negotiations at the multilateral level, including on services, with the WTO’s Doha Round of trade talks facing an uncertain future after members agreed to disagree over whether to reaffirm its mandate at last December’s ministerial conference. (See Bridges Daily Update, 19 December 2015)

Unlike TISA, which exclusively focuses on services, TTIP and RCEP address both services and a host of other issues. The negotiations of these mega-regional agreements – along with the TPP – are wide-ranging and ambitious, addressing services in depth in order to facilitate global value chain (GVC) operations. Therefore, negotiations cover not only barriers to trade but also investment for both goods and services. Other areas for negotiation include tariff elimination, regulatory cooperation, and improved and new rules in areas such as intellectual property, investment, labour, and the environment. 

TISA work plan agreed

In February, the 23 participants of the TISA negotiations agreed on a revised work plan with key milestones for potentially reaching a deal this year. The plan would see the content of key “annexes” to the trade pact agreed by this July, while aiming to finalise the content of the remaining text by September, according to a European Commission report. The next negotiation round will be chaired by Australia during the second week of April, with two revisions of market access offers set for May and October. 

The meeting marked the sixteenth formal round of talks since the TISA initiative officially began in March 2013. The group involved, which covers 50 countries when counting all 28 EU member states individually, came together in an effort to overcome the two-decade lack of progress in multilateral services negotiations.

Members of the TISA group have cited the outcome of the WTO’s 2011 ministerial conference in Geneva – where members were encouraged to reach “provisional or definitive agreements based on consensus earlier than the full conclusion of the single undertaking” in a bid to advance the Doha talks.

While TISA participants recognise the strong foundation provided by the WTO’s General Agreement on Trade in Services (GATS), they note that services trade has evolved significantly in the years since that deal was enacted. Therefore, they explained in their joint July 2012 statement announcing the talks, the proposed deal would aim to capture a substantial part of the liberalisation that has been seen “autonomously as well as through more than 100 services trade agreements notified to the WTO.”

The group’s participants are geographically dispersed and at different levels of development, ranging from the United States and the European Union to Pakistan and Mauritius, while sharing a common interest and objective in advancing the services liberalisation agenda. In this spirit, they say that the agreement “should be comprehensive in scope, including substantial sectoral coverage with no a priori exclusion of any sector or mode supply.”

These countries make up two-thirds of global GDP and 70 percent of global services trade, accounting for 23 percent of global population.

Moreover, the pact also aims at addressing new and enhanced rules, with negotiations touching upon cross-border trade in services, investment, financial services, telecommunications, electronic commerce, maritime and air transport, road freight transport and related logistics services, competitive delivery services, energy-related services, environmental services, movement of natural persons, professional services, mutual recognition of professional qualifications, domestic regulation, transparency, state-owned enterprises, government procurement, competition policy, and small and medium enterprises.

The negotiating modality being used in TiSA is a hybrid, scheduling national treatment commitments under a negative list approach and market access ones under a positive list approach.

According to the European Commission’s report on the February round, TiSA participants got closer to agreeing on text in Annexes covering two sensitive matters: digital issues, namely telecommunications, e-commerce, and localisation, as well as Mode 4. There were also discussions addressing financial services as well as transparency in sectoral annexes, along with continued bilateral talks on market access.

TTIP eyes 2016 outcome

Meanwhile, negotiators for the EU-US TTIP deal confirmed last week that they wish to conclude the talks this year, but only if the progress on substance allows.

The two trading giants make up half of global GDP, a third of global trade, 57 percent of global services trade, and around 11 percent of the world’s population.

Given that tariffs are relatively low on both sides of the Atlantic – with the simple average applied tariff at 5.5 percent for the EU and 3.2 percent for the US in 2013, with only some remaining tariff peaks – the major gains are expected to come from services and government procurement liberalisation, investment, and enhanced regulatory cooperation.

Regarding services, sources say that TTIP is following a negative list approach, in line with how the EU and Canada conducted their services talks under the banner of their Comprehensive Economic and Trade Agreement (CETA).

With twelve rounds behind them, the two sides aim to reach an agreement ideally before the conclusion of US President Barack Obama’s administration in early 2017. (For more on TTIP, see related story, this edition)

The two parties are set to hold two more rounds in the coming months with the objective of reaching advanced, consolidated draft text on all issues by the summer break.

RCEP aims for new deadline

For its part, the RCEP includes 16 countries, including the 10 members of the Association of Southeast Asian Nations – Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam – as well as six countries with whom ASEAN has an FTA, namely Australia, China, India, Japan, South Korea, and New Zealand.

This large group comprises developed and developing countries, among them also emerging economies that are not involved in other mega-regional negotiating processes, namely China and India. Together they account for one-third of global GDP and trade, 20 percent of global trade in services and half of the world’s population.

The group launched negotiations in November 2012, aiming for a deal that will, among other things, be “comprehensive, of high quality and substantially eliminate restrictions and/or discriminatory measures with respect to trade in services between the RCEP participating countries.” (See Bridges Weekly, 21 November 2012)

Furthermore, these guiding principles state that the agreement will be consistent with the GATS and will build on the commitments made both under the GATS and ASEAN+1 FTAs, with no exclusion of sector or mode of supply in negotiations. Although it is not completely clear which modality the RCEP participants are following in services negotiations, India and six ASEAN members have reportedly insisted on following a positive list approach, according to the Economic Times.

According to the Australian government, negotiations on the approach to scheduling both services and investment commitments took place during the fourth round in April 2014, in China, indicating that participants “hold a diversity of views and there is a broad range of interests and varying levels of ambition across the negotiating agenda.”

According to the RCEP leaders’ joint statement last November in Kuala Lumpur, Malaysia, “substantive negotiations on trade in goods, trade in services and investment have intensified,” also recognising the progress made in text-based negotiations. By the end of last year, it was reported that revised services offers had been circulated and the first substantive meetings of the Sub-Working Groups on Financial Services and Telecommunications had taken place.

The eleventh round, held from 15-19 February in Brunei, will be followed by three other rounds during 2016 before the expected conclusion of negotiations, according to a statement from the Malaysian government. This has been tentatively scheduled for September in Laos, to coincide with the 28th & 29th ASEAN Summit & Related Summits  

Governance questions

These developments come as the area of services trade has drawn growing attention over the years, both for its importance in terms of output and employment but also as a driver for productivity growth and facilitator for operating global value chains. Furthermore, the membership of these various parallel groups often overlap; for example, both TTIP members are also in TISA, while Japan is a participant in TPP, RCEP, and TiSA.  

These various processes have therefore all sparked interest in how these may affect world trade both in terms of market access opportunities but also regarding global governance in services trade, among other issues. Analysts note that this is particularly clear with TISA, where participants are already discussing the eventual multilateralisation of the agreement.

ICTSD reporting; “India to resist tariff cut at RCEP meeting,” THE ECONOMIC TIMES, 9 February 2015.

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